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London Stock Exchange Proposes Special Listing for Private Companies

London Stock Exchange LSEG 0.03%

The group is trying to blur the line between public and private companies as part of a plan to list a fast-growing technology company in the UK in the wake of Brexit.

According to LSE regulators, the Financial Behavior Oversight Organization, and someone familiar with issues and proposals to the UK, LSE is a special market for private companies to publicly trade stock on the exchange on certain days. Proposed to be founded. The Treasury as seen by The Wall Street Journal.

Private company stocks are publicly traded every six months, once a month or quarter, for one to five days in each trading period. These companies are not subject to the same degree of regulatory oversight as fully listed companies. The requirement that the founders of start-ups say is the deterrence of listed stocks.

“The new venue type will serve as a stepping stone between the private market and the fully open market,” LSE said in a document sent to the FCA and the Treasury on December 21. It is available to companies seeking to raise capital without imposing growth-blocking regulations. “

The founders of startups, their employees, and early investors can raise cash by selling shares to individual and institutional investors. Large private companies will also have access to the public market under the proposal. LSE said in a proposal that tech companies such as banking app Revolut could later buy a huge amount of Klarna and remittance startup Wise could use this route to raise money for shareholders. rice field.

“There may be additional routes to the market to support a wide range of companies throughout the funding life cycle, such as helping to move from the private market to the public market,” said an LSE spokesperson. ..

This program requires regulatory approval and legal amendments.

A spokesperson for FCA and HM Treasury declined to comment.

The proposal begins with the aim of rebuilding financial markets after the UK left the European Union in 2021. In November, the UK government gave FCA, the premier financial policing organization, financial stability and consumer protection.

London is struggling to attract young, fast-growing companies, and tech companies usually choose to go public in the United States or Asia. The recent boom in special purpose acquisition companies (SPACs) has occurred primarily in the United States. The UK revised its IPO rules last year to make London more attractive to tech companies and SPACs.

LSE has withstood a long-term decline in the number of companies listed on the exchange, dropping from 2,365 five years ago to 1,989 in 2020. Last year, a gradual reversal was seen, and the number of listed companies rose to 2,017.

The LSE proposal allows companies to trade private stocks between public trading windows. According to the proposal, the company can also share inside information with key stakeholders during the period without making it public.

The LSE must submit a “cleansing statement” that discloses important information prior to the open transaction window. This is intended to level the playing field.

LSE named this idea “MTF-lite” based on the industry terminology of financial markets known as multilateral trading facilities. If this goes on, it will be the first exchange for this type of hybrid model, where private companies regularly access public investors.

There is an existing market for privately held US stocks operated by Nasdaq Ltd

Forge Global Inc. And Equity Zen Inc. Number of competing startups such as.

However, these exchanges are not accessible to most retail investors. Current regulations by the U.S. Securities and Exchange Commission are limited to accredited investors, that is, those who meet certain asset criteria, such as net worth over $ 1 million excluding home and annual income over $ 200,000. ..

According to The Wall Street Journal, the SEC is working on a plan to force more disclosure about the finances and operations of private companies in the United States due to concerns about under-monitoring of fast-growing market segments.

Write in Anna Hirtenstein (anna.hirtenstein@wsj.com)

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London Stock Exchange Proposes Special Listing for Private Companies

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